Fuel surcharge fee OK’d

Government agencies will be paying an additional 3.5 cents per kwh while residential, commercial, and non-profit consumers will shell out an extra 1.5 cents per kwh for their electricity starting next month.

With a 5-2 vote, the Commonwealth Utilities Corp. board of directors approved the fuel surcharge proposal yesterday. A notice adopting the proposed regulations will be published on the Commonwealth Register on Monday and the new fee will take effect 10 days after.

Under the approved regulations, CUC will implement starting December 2004 a fuel surcharge fee of 3.5 cents per kwh for government customers and a surcharge of 1.5 cents per kwh for all other classes of customers.

This will bring the government rate to 19.5 cent per kwh, the commercial rate to 17.5 cents, and the residential/nonprofit rate to 13.5 cents.

The regulations also state that the initial surcharge may be increased gradually or in a single increase, but it may not exceed the maximum level of 3.5 cents per kwh until December 2005.

Further, any increment must be sanctioned by the CUC board of directors.

The CUC board made the decision amid offers by the government to subsidize the utility firm’s fuel costs and demands by the community for CUC to find income-generating alternatives to the fuel surcharge.

Those who voted in favor of the fuel surcharge were board chair Francisco Q. Guerrero, vice chair Herman Sablan, and members Rufina Miles, Allen Perez, and Martin Mendiola.

They stressed that CUC has no choice but to immediately implement the fuel surcharge given the firm’s serious financial problems and the soaring price of production fuel.

As he cast his vote, Sablan also instructed the CUC management to not rely solely on the revenues to be generated from the fuel surcharge. “Strive even harder to look into other alternatives and continue with your cost-saving measures,” he told the management.

Only board members Joe Torres and Velma Palacios voted against the additional fee, saying CUC must seriously consider the concerns of the government and the community before taking any action on the fuel surcharge.

“I voted no because I still have unanswered questions about this plan. I think the fuel surcharge is not the only answer. I want to know what else we are going to be doing. The business sector raised a lot of concerns; others asked for more time to prepare. We haven’t really sat down to address all the issues,” Palacios said in an interview.

The CUC management welcomed the board’s decision.

CUC executive director Lorraine Babauta noted that while the implementation of the fuel surcharge does not merit celebration, the additional revenues to be collected will greatly help the utility firm’s financial status.

She also assured the board that collections from the surcharge will be used for fuel expenses alone.

CUC comptroller Sohale Samari echoed Babauta’s statement. “We know this has been a very difficult decision for all of us. But be assured that we will carry through all of your instructions,” Samari said.

He said the management will continue to be aggressive in pursuing CUC’s accounts receivables and will take every possible austerity measure “without sacrificing our quality of operation.”

The Hotel Association of the Northern Mariana Islands was among the major business groups that have opposed the rapid implementation of the fuel surcharge.

In a Nov. 24 letter to CUC chair Guerrero, HANMI president Lynn A. Knight said the imposition of a large rate increase over a short period of time (as CUC had proposed) will have a detrimental impact on the local economy.

“It will not only hurt large and small businesses, which may have to increase prices as a result of this, but will negatively impact everyone living in our islands,” Knight said. “[In] a worst-case scenario, it will not only cause the cost of goods and services Commonwealth-wide to increase rapidly, but it may also impact local employment as some businesses are forced to cut their overhead in order to survive.”

Knight also said that CUC’s finances may suffer all the more, if power rates became too expensive and some businesses begin running their own generators rather than using CUC electricity.

She reported that based on a recent survey of HANMI members, the group found that some hotels are not using CUC power at this time, and several others are on a part-time basis due to the fact that CUC does not have enough load capacity in their areas and/or are not able to provide reliable service.